| Global, UK & Europe | Articles, Publications
Jeremy Hunt launched the Edinburgh Reforms to some fanfare this month. Billed as a package of measures allowing the country to “seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime”, some would be forgiven for reading more into the reforms than is perhaps the case. It would be wrong to characterise the reforms as de-regulation, and whilst there are areas where rules are likely to be repealed, this is largely with a view to replacing them with something that works better for the UK. Less regulation will not, and should not, be the result.
As Andrew Bailey pointed out in the FT recently, the current regulatory regime was not established to address a particular problem that then went away, but rather to establish some core principles which are as relevant today as they were at the time of the financial crisis. In essence the Edinburgh reforms set out more detail on how UK financial regulation is intended to work in a post-Brexit era. In it, the government outlines the mechanisms for transferring the rules that started life in EU directive and are now contained in the UK statute book, into the various regulators rule books. The package also kicks off consultations on some changes to the rules and signpost further consultation in due course. Lastly, it includes new remit letters for the PRA and FCA with clear, targeted recommendations on growth and international competitiveness.
Some of the proposals do indeed make use of our post-Brexit freedom to change EU imposed measures. For example, repealing (and then replacing) the PRIPPS regulations, reviewing the rules around short selling and reviewing the Consumer Credit Regime. Indeed, the reforms indicate that further reviews will take place as part of the transfer of rules to the regulators’ rulebooks over time. But given the influential position that the UK had at the EU rule making table it seems unlikely that many requirements will be subject to very significant change. Reviewing arrangements around ring-fencing and SMCR, both measures put in place by the UK unilaterally post financial crisis, seems sensible, but anything more than tweaking at the margins may not be appropriate.
It is in relation to the regulators’ new secondary objectives around growth and competitiveness that that signs of strain between government and the regulators are most likely to surface. It is not yet clear to what extent the government’s proposed review of the senior managers regime is part of the competition agenda, not least because fears that the regime might scare away top talent do not appear to have come to fruition. In the light of the regulator’s seeming inability to effectively use the regime to hold senior bankers to account, it is perhaps not surprising. However, SMCR has delivered benefits around raising the bar and keeping some bad apples out of the game. Regulators should stand firm in the face of any relaxations, either in the name of competitiveness or otherwise, that might undermine the gains achieved so far.
‘View from the Chair’ is Bovill’s regular column from our Executive Chair Ben Blackett-Ord who founded the firm in 1999 and led it as CEO until 2022. Ben continues to support Bovill’s executive team and clients, as well as being a prominent figure in the industry.
